Markets
Emerging Markets Are Not All Created Equal
For most investors, targeting foreign countries where there are high expectations for growth is a useful strategy.
After all, in the United States, Canada, and Europe, economies are mostly growing at about 2% or less per year. And while these developed markets are less risky to invest in, finding value can be tricky.
That’s why for many decades, investors have been allured by the fast growth of far-off economies. In the 1950s and 1960s, Japan’s economy regularly expanded at a 10%+ clip, and who can forget the “Four Asian Tigers” that followed in Japan’s footsteps? In the 2000s, the focus shifted to the BRICS (Brazil, Russia, India, China, South Africa) – and more recently, attention has been on countries like Indonesia, Nigeria, Colombia, and Turkey.
Different Risks in Emerging Markets
Although emerging markets are similar in that they have high expectations for growth, it’s important to remember that these countries have very unique and different sets of risks.
Today’s visualization comes to us from Charles Schwab, and it provides a simple breakdown of the types of risks faced by the economies of emerging markets:
As an example, Mexico and Chile have considerably different risks, according to the chart.
Aside from currency risk, which they both share, Chile is particularly prone to sensitivity in the world’s commodity markets. That makes sense, because Chile is the world’s largest supplier of copper – and close to 50% of the country’s exports are copper-related, including refined copper (22.6%), copper ore (20.9%), raw copper (3.6%), and copper wire (0.5%).
On the other hand, Mexico is noted as having particular sensitivity to what happens in developed markets such as the United States. This is because 81% of Mexican exports go to the U.S., while the next biggest buyer of Mexican goods is Canada at 3% of exports. If the buying power of the U.S. and Canada is affected, it could have big consequences on what will be bought from Mexico.
Markets
The Top Google Searches Related to Investing in 2022
What was on investors’ minds in 2022? Discover the top Google searches and how the dominant trends played out in portfolios.
The Top Google Searches Related to Investing in 2022
It was a turbulent year for the markets in 2022, with geopolitical conflict, rising prices, and the labor market playing key roles. Which stories captured investors’ attention the most?
This infographic from New York Life Investments outlines the top Google searches related to investing in 2022, and offers a closer look at some of the trends.
Top Google Searches: Year in Review
We picked some of the top economic and investing stories that saw peak search interest in the U.S. each month, according to Google Trends.
| Month of Peak Interest | Search Term |
|---|---|
| January | Great Resignation |
| February | Russian Stock Market |
| March | Oil Price |
| April | Housing Bubble |
| May | Value Investing |
| June | Bitcoin |
| July | Recession |
| August | Inflation |
| September | US Dollar |
| October | OPEC |
| November | Layoffs |
| December | Interest Rate Forecast |
Data based on exact searches in the U.S. from December 26, 2021 to December 18, 2022.
Let’s look at each quarter in more detail, to see how these top Google searches were related to activity in the economy and investors’ portfolios.
Q1 2022
The start of the year was marked by U.S. workers quitting their jobs in record numbers, and the effects of the Russia-Ukraine war. For instance, the price of crude oil skyrocketed after the war caused supply uncertainties. Early March’s peak of $125 per barrel was a 13-year high.
| Date | Closing Price of WTI Crude Oil (USD/Barrel) |
|---|---|
| January 2, 2022 | $76 |
| March 3, 2022 | $125 |
| December 29, 2022 | $80 |
While crude oil lost nearly all its gains by year-end, the energy sector in general performed well. In fact, the S&P 500 Energy Index gained 57% over the year compared to the S&P 500’s 19% loss.
Q2 2022
The second quarter of 2022 saw abnormal house price growth, renewed interest in value investing, and a bitcoin crash. In particular, value investing performed much better than growth investing over the course of the year.
| Index | Price Return in 2022 |
|---|---|
| S&P 500 Value Index | -7.4% |
| S&P 500 Growth Index | -30.1% |
Value stocks have typically outperformed during periods of rising rates, and 2022 was no exception.
Q3 2022
The third quarter was defined by worries about a recession and inflation, along with interest in the rising U.S. dollar. In fact, the U.S. dollar gained against nearly every major currency.
| Currency | USD Appreciation Against Currency (Dec 31 2020-Sep 30 2022) |
|---|---|
| Japanese Yen | 40.1% |
| Chinese Yuan | 9.2% |
| Euro | 25.1% |
| Canadian Dollar | 7.2% |
| British Pound | 22.0% |
| Australian Dollar | 18.1% |
Higher interest rates made the U.S. dollar more attractive to investors, since it meant they would get a higher return on their fixed income investments.
Q4 2022
The end of the year was dominated by OPEC cutting oil production, high layoffs in the tech sector, and curiosity about the future of interest rates. The Federal Reserve’s December 2022 economic projections offer clues about the trajectory of the policy rate.
| 2023 | 2024 | 2025 | Longer Run | |
|---|---|---|---|---|
| Minimum Projection | 4.9% | 3.1% | 2.4% | 2.3% |
| Median Projection | 5.1% | 4.1% | 3.1% | 2.5% |
| Maximum Projection | 5.6% | 5.6% | 5.6% | 3.3% |
The Federal Reserve expects interest rates to peak in 2023, with rates to remain elevated above pre-pandemic levels for the foreseeable future.
The Top Google Searches to Come
After a year of volatility across asset classes, economic uncertainty remains. Which themes will become investors’ top Google searches in 2023?
Find out how New York Life Investments can help you make sense of market trends.
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